December 17, 2013 Newsletter

Dear Friends,

Tangents:

110 years ago: The Wright brothers, Wilbur and Orville, succeeded in the first powered flight.  Orville pilots a plane for 12 seconds and 120 feet.

December 17^th, 1903, Orville Wright sent this telegram to his father from North Carolina:

SUCCESS FOUR FLIGHTS THURSDAY MORNING ALL AGAINST TWENTY-ONE MILE WIND STARTED FROM LEVEL WITH ENGINE POWER ALONE AVERAGE SPEED THROUGH AIR THIRTY-ONE MILES LONGEST 57 SECONDS INFORM PRESS HOME CHRISTMAS.

Photos of the day

Sculptor Juuso Partanen of Finland carves an ice sculpture of a tree at the Brussels Ice Magic Festival. Some 20 artists from all over the world made sculptures depicting characters from comic strips out of 420 tons of ice. Francois Lenoir/Reuters

Pedestrians cross a Manhattan street during a light snowfall in New York. The National Weather Service is predicting another 2 to 4 inches of snow for New York City. Mark Lennihan/AP

Market Closes for December 17^th, 2013

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Callie Bost

Dec. 17 (Bloomberg) — Canadian stocks were little changed as manufacturing sales unexpectedly increased last month and Federal Reserve policy makers began a two-day meeting in which they may discuss a timeline for reducing monetary stimulus.

Asanko Gold Inc., an exploration company focused on West Africa, fell 2.9 percent after it agreed to purchase PMI Gold Corp. for about C$183 million ($173 million). PMI jumped 45 percent. Constellation Software Inc. jumped 5.3 percent for a second day of gains after the company agreed to buy software company Total Specific Solutions.

The Standard & Poor’s/TSX Composite Index declined 4.25 points, or less than 0.1 percent, to 13,180.16 at 4 p.m. in Toronto. The benchmark equity gauge has slid 1.6 percent this month.

“Manufacturing sales are probably a good reason why banks are up,” Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier Inc., which manages about C$4.77 billion, said in a telephone interview from Toronto. “The banks’ performance is a good proxy for the economy and that seems to be the highlight today.”

Canadian manufacturing sales in October rose 1.0 percent to C$50.1 billion, Statistics Canada said today in Ottawa. The result exceeded all 15 forecasts in a Bloomberg survey of economists that had a 0.3 percent decline as the median estimate. The increase in sales was led by the largest gain by food manufacturers in two decades, as factories handled a record canola harvest.

Toronto-Dominion Bank added 0.2 percent to C$95.81. Onex Corp., a private-equity investment company, and Northern Property, a real-estate investment trust, led gains among financial companies with advances of at least 2.1 percent.

Six of the 10 main industries in the S&P/TSX gained on trading volume 5.8 percent higher than the 30-day average, led by a 1.9 percent advance in information technology companies.

The S&P/TSX Gold Index declined 0.1 percent as the metal fell for the first time in three days. Alacer Gold Corp. fell 7.1 percent to C$2.21, while OceanaGold Corp. decreased 4.3 percent to C$1.54 and Torex Gold Resources Inc. dropped 4.6 percent to C$1.05.

The Federal Open Market Committee, or FOMC, begins a two- day policy meeting today. About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted the U.S. central bank will start paring stimulus when it concludes tomorrow. Gains in manufacturing, technology and housing fueled “modest to moderate” economic growth from early October through mid- November, the central bank said in its Beige Book survey released Dec. 4.

Asanko plunged 2.9 percent to C$2.04. The company said the combination of its Esaase gold project and PMI’s neighboring Obotan projects in Ghana will have a combined 7.5 million ounces of measured and indicated gold resources. The offer is valued at C$0.44 per PMI share and is 58 percent more than Vancouver-based PMI’s closing price yesterday.

PMI rose 13 cents, its biggest gain since October 2011, to 41 Canadian cents.

Constellation increased 5.3 percent to C$217.73, the highest level since it began trading in 2006. Global Maxfin Capital Inc. analysts raised the stock to a strong buy rating from buy.

Canexus Corp., which runs oil storage facilities, rose 7.9 percent to C$6.86 after announcing progress in its rail transport operations.

USA

By Lu Wang and Whitney Kisling

Dec. 17 (Bloomberg) — U.S. stocks fell, following yesterday’s rally for the Standard & Poor’s 500 Index, before Federal Reserve policy makers announce plans for their monthly bond-buying program tomorrow.

Tenet Healthcare Corp. fell 1.9 percent to pace declines among hospital stocks as Citigroup Inc. said the industry’s November admissions were the “weakest” ever. 3M Co. advanced 2.9 percent after the company projected a 2014 profit in a range whose top end exceeded analysts’ estimates. Boeing Co. climbed 0.9 percent after authorizing the largest share buyback in its history and boosting its dividend.

The S&P 500 declined 0.3 percent to 1,781 at 4 p.m. in New York. The Dow Jones Industrial Average lost 9.31 points, or 0.1 percent, to 15,875.26. About 6 billion shares changed hands on U.S. exchanges, 2.3 percent below the three-month average.

“There are so many people watching the Fed’s decision, so much money on the edge, that the market is sort of just jumpy right now,” Sam Wardwell, an investment strategist at Pioneer Investments in Boston, said in a phone interview. His firm manages about $225 billion. “Everybody knows the Fed is going to taper sooner or later. The question is, are people putting on too many short positions, or not enough short positions? This is everybody betting on the outcome so the market is going to be volatile.”

Traders have boosted hedging against stock losses, driving the Chicago Board Options Exchange Volatility Index up 33 percent since Nov. 22 to a two-month high. The S&P 500 has fallen 1.4 percent this month, leaving it on track for the first December decline since 2007.

The equities benchmark climbed 0.6 percent yesterday, halting a four-day decline, amid concern that improving economic data would prompt the Fed to slow its stimulus as soon as tomorrow.

About 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted that the Fed will start to reduce its $85 billion of monthly bond purchases when it concludes the policy meeting. That compared with 17 percent in a survey from November.

Chairman Ben S. Bernanke has quadrupled Fed assets since 2008 with three rounds of bond purchases intended to reduce unemployment by lowering long-term borrowing costs. Vice Chairman Janet Yellen, who may win Senate confirmation this week to replace Bernanke, has been a supporter of the policy.

The central bank has said it will hold its target interest interest rate near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent. Unemployment fell to a five-year low of 7 percent last month.

“The Fed meeting, everyone has an eye on that,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “While they don’t think the tapering talk is going to subside yet, there are still some apprehensions about what could come out of that.”

Data today showed the cost of living in the U.S. was unchanged in November from a month earlier, showing inflation is making scant progress toward the Federal Reserve’s goal.

In Washington, the U.S. Senate advanced the budget agreement to a final vote by tomorrow with Republicans divided on their support for the measure. The Senate voted 67-33 to end debate on the $1.01 trillion U.S. spending plan. The measure passed the House 332-94 on Dec. 12 with almost equal numbers of Republicans and Democrats in support.

The S&P 500 has surged 25 percent this year, on course for the biggest annual gain since 2003, as the Fed maintained its stimulus and economic data exceeded expectations. The gauge has rallied more than 160 percent from a 12-year low in 2009.

The CBOE Volatility Index, the gauge known as the VIX, climbed 1.1 percent today to 16.21, extending a five-day rally to 20 percent.

Telephone and energy stocks fell more than 0.6 percent to lead declines as eight of 10 S&P 500 groups retreated. Verizon Communications Inc. dropped 1.5 percent to a two-month low of $47.56 to lead losses in the Dow.

Tenet Healthcare slid 1.9 percent to $39.86. Inpatient admissions declined 4 percent to 5 percent in November from last year, according to Citigroup’s monthly survey of 98 hospitals. A new two-midnight rule has hurt admissions and revenue, Citigroup said in a note.

HCA Holdings Inc., the largest for-profit U.S. hospital chain, slipped 3.5 percent to $45.54.

Carefusion Corp., a medical technology company, lost 2.5 percent to $38.49. Goldman Sachs Group Inc. cut the stock’s rating to sell from neutral.

3M, the manufacturer with a product line spanning electronics to dental braces, climbed 2.9 percent to $131.39 for the biggest advance in the Dow. Earnings will be $7.30 to $7.55 a share next year, 3M said. That compared with the average estimate of $7.40 a share among 17 analysts surveyed by Bloomberg. The company increased its quarterly dividend by 35 percent to 85.5 cents a share.

Visa Inc. climbed 2.7 percent to $213.25, an all-time high.  Concern that the world’s biggest bank-card network is losing position to MasterCard Inc. was overdone, James Friedman, an analyst at Susquehanna International Group, wrote in a note.  MasterCard Inc. gained 0.2 percent to $797.95 to extend a record.

Boeing gained 0.9 percent to $135.88. The planemaker said it would buy back $10 billion. It also said the quarterly dividend would rise to 73 cents a share from 48.5 cents. Boeing has been reaping more cash as it accelerates production of some of its top-selling jetliners, including the single-aisle 737 and the wide-body 777 and 787 Dreamliner.

Facebook Inc. rose 2 percent to a record $54.86. The social-networking site is testing video advertisements that automatically play in users’ news feeds, seeking to catch up with other websites offering short commercials online. The first promotions are starting to run this week, the company said.

Hewlett-Packard Co. advanced 2 percent to $27.45. JPMorgan Chase & Co. raised its recommendation on the personal-computer maker to overweight from neutral. The PC market appears to be stabilizing and the decline in printing demand may be easing, analyst Mark Moskowitz wrote in a note.

Frontier Communications Corp. jumped 8.6 percent, the most in the S&P 500, to $4.78. The phone company agreed to buy AT&T Inc.’s Connecticut landline business and statewide fiber-optic network for $2 billion in cash to focus on more lucrative wireless services.

Have a wonderful evening everyone.

Be magnificent!

When the mind and intellect developed, man asked,

Who am I?  Who is it before me?

The search for reality began…

Moving one step towards finding the answer to the question,

Who am I, we brought consciousness from outside to inside.

Wisdom turned the direction of the consciousness within and

we perceived our soul.

The journey of the soul in the outer world was over and the journey within ad begun.

Acharya Mahaprajna, 1920-2010

As ever,

Carolann

I skate to where the puck is going to be

not where it has been.

-Wayne Gretzky, 1961-

Carolann Steinhoff, B.Sc., CFP®, CIM, FCSI

Senior Vice-President &

Senior Investment Advisor

Queensbury Securities Inc.,

St. Andrew’s Square

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7